Post-Election Rally: A New Era for Stocks?
The world’s largest asset manager is making a bold move, pouring billions into the stock market just days after the election. This sudden influx of capital is a significant shift from the caution that dominated the pre-election landscape.
A Record-Breaking Inflow
More than $1.9 billion flooded into the iShares MSCI USA Momentum Factor ETF (MTUM) on Friday, marking the largest one-day flow since the fund’s launch in 2013. This massive investment is a clear indication of BlackRock’s confidence in the US equities market.
A Shift Away from Bonds
At the same time, a record $1 billion exited the iShares Core Total USD Bond Market ETF (IUSB). This exodus from bonds is a telling sign that investors are becoming more risk-tolerant and seeking out higher returns.
BlackRock’s Conviction
According to a BlackRock spokesperson, the firm adjusted its model portfolio allocations last week, reflecting its conviction that the US equities market will continue to climb. With election uncertainty resolved, businesses are expected to resume making decisions on capital allocations, leading to a surge in economic activity.
Pent-Up Demand Unleashed
The influx of funds into MTUM reflects BlackRock’s belief that a “coiled spring” of pent-up business activity will soon be unleashed. As election uncertainty fades, corporate decisions that were formerly on hold will resume, driving growth and fueling the market’s upward momentum.
Model Portfolios: A Powerful Force
Model portfolios, which package together funds into ready-made strategies, have grown significantly in recent years. With assets reaching an estimated $5.1 trillion at the end of 2023, even small adjustments can cause big shifts in ETF flows.
Economic Data Supports Bullish Conviction
Recent economic data, showing a cooling labor market and resilient growth, supports the Federal Reserve’s rate-cutting campaign. This, combined with post-election clarity, has strengthened BlackRock’s bullish conviction.
Positioning for a Broader Relief Rally
BlackRock’s model portfolio team is increasing its overweight on stocks from 3% to 4% heading into year-end. Rather than making tactical sector or industry bets tied to specific electoral outcomes, the firm is positioning for a broader relief rally that will transcend partisan results.
Leave a Reply